2016 (3) TMI 161 - AT - Central Excise

Cenvat credit on AED (T&TA) for payment of basic excise duty on clearance of the final product from the factory - whether appellant had intentionally utilized the AED (T & TA) for payment of basic excise duty, knowing fully well that such utilization is prohibited under Rule 3 (6) (b) of the Cenvat Credit Rules, 2002? - initiation of proceedings for recovery of wrongly availed cenvat demand alongwith interest and imposition of equal amount of penalty by invoking the extended period of limitation - Held that - Taking of cenvat credit of AED (T&TA) and utilization towards payment of BED is not attributable to fraud, collusion or any willful misstatement with intent to evade payment of Central Excise Duty, for the reason that the appellant had maintained proper records showing availment and utilization of cenvat credit on such disputed duty. Therefore, in absence of those ingredients, issuance of show cause notice should be confined to a period of one year from the date of utilization of such wrongly availed credit. It is not in dispute that the appellant has not complied with the statutory provisions in not filing the returns in time and that the credit particulars were not reflected therein. Since, the information regarding taking of cenvat credit on the disputed duty amount and utilization thereof for clearance of the finished products was within the knowledge of the Department, the show cause notice issued on 04.03.2008, proposing recovery of cenvat credit for the period April 2003 to July, 2004,is barred by limitation of time. See KG DENIM LTD. Versus COMMISSIONER OF CENTRAL EXCISE 2007 (10) TMI 95 - CESTAT, CHENNAI Therefore, proceeding initiated by Department for recovery of wrongly availed cenvat credit alongwith interest and imposition of penalty by invoking the extended period of limitation is not justified. - Decided in favour of assessee

Summary

Issues:
1. Utilization of cenvat credit on AED (T & TA) towards basic excise duty.
2. Validity of show cause notice and limitation period.
3. Compliance with statutory provisions regarding filing of returns.

Analysis:
1. The case involved the appellant, engaged in manufacturing man-made fabrics, availing Cenvat Credit on various duties paid on inputs. The Central Excise Officers objected to the appellant's utilization of cenvat credit on AED (T & TA) towards payment of basic excise duty on final products, citing Rule 3 (6) (b) of the Cenvat Credit Rules, 2002. A show cause notice was issued for recovery of the cenvat credit, which was confirmed by the Joint Commissioner and upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal.

2. The appellant argued that they were unaware of the restriction on using cenvat credit on AED (T & TA) for basic excise duty payment and maintained proper records. The appellant contended that the proceedings for recovery were not maintainable due to lack of willful suppression or fraud. The appellant also claimed that the show cause notice was time-barred, citing relevant judgments like Gopal Zarda Udyog vs. CCE and others. On the contrary, the respondent argued that the appellant intentionally misused the cenvat credit, justifying the recovery proceedings.

3. The Tribunal observed that while the appellant's use of cenvat credit on AED (T & TA) for basic excise duty was impermissible under the law, there was no evidence of fraud or willful misstatement. The Tribunal held that the show cause notice should have been issued within one year of the credit utilization, which was not the case. The Tribunal referenced the case of K.G. Denim Ltd. vs. CCE, Salem, where a similar issue was decided in favor of the appellant due to the limitation period. Consequently, the Tribunal set aside the impugned order and allowed the appeal solely on the ground of limitation.

In conclusion, the Tribunal ruled in favor of the appellant, finding the recovery proceedings unjustified due to the expired limitation period, despite acknowledging the impermissible use of cenvat credit.